Al Qaeda-linked insurgents who overran large parts of the north of the country earlier this week also seized about $450 million during a bank heist, Mosul Mayor Athier Nujaifi told NBC News. That makes the Islamic State of Iraq and al-Sham (ISIS) the world's richest terrorist group.

The Sunni fighters were reportedly only about 40 miles from Baghdad on Friday. Drivers were charging Iraqis trying to leave the city as much as $100 – many times the daily salary of an average Iraqi worker.

American-trained and equipped Iraqi troops have been surrendering in droves - providing the ISIS militants with weapons, including Humvees once used by U.S. forces.

An Iraqi soldier who surrendered to ISIS in Mosul told NBC News he was ashamed of his actions but was following his commanding officer’s orders. Hussein al-Shiblie claimed that the officers in Mosul appeared to have a deal with ISIS.

On Thursday, ISIS declared Shariah law was in effect in the areas they controlled, outlawed other forms of Islamic worship and ordered woman to wear the hijab – a traditional Muslim head and body covering. They also declared that no other armed forces would be tolerated except ISIS.

Meanwhile, a United Nations official told Reuters that the number of people killed after ISIS militants overran Mosul may run into the hundreds.

Signs pointed to the worsening sectarian and ethnic tensions, with a representative of Iraq's most influential Shiite cleric Grand Ayatollah Ali al-Sistani urging people to take up arms and defend their country from the insurgents.

And in the northern oil-rich city of Kirkuk, Kurdish forces had moved in to take over posts abandoned by the Iraqi army.